A Team Production Theory of Canadian Corporate Law

The article applies the Team Production Theory developed by American corporate law scholars, Margaret Blair and Lynn Stout, to argue that Canadian corporate law\u27s understanding of public corporations that are not controlled by a single shareholder or group of shareholders reflects a director primacy norm rather than a shareholder primacy norm. Canadian corporate law provides that directors of such public corporations with widely-held share ownership and voting rights are free from direct control by any corporate stakeholders. A potential departing point for Canadian corporate law, the oppression remedy, continues to develop to deal with extra-legal advantages rooted primarily in unequal power relations among corporate stakeholders. However, in its current and predicted future applications, the oppression remedy does not provide any given stakeholder group with an ability to dominate the boards of public corporations and obviate the director primacy norm. The article suggests that because the director primacy norm accurately describes Canadian corporate law, further consideration needs to be given to corporate law\u27s relative relevance in dictating how Canadian corporations currently operate

Debt or Equity? A Puzzle for Canadian Bankruptcy Law

With the increased sophistication of financial markets and financial instruments, the use of hybrid investments has been on the rise in recent decades. This article considers the question of how Canadian courts have drawn the border between debt and equity in the context of bankruptcy proceedings. The basic argument is that Canadian courts should allow the recent reforms to bring about their intended clarity on the border between debt and equity by not departing from the bright line test set out in the legislation. The article compares the pre and post-amendment case law and uses two case studies to illustrate the undue complexity that has been created by layering a contextual analysis on top of the new bright line tests. Simply put, in the context of investment classification decisions for the purposes of bankruptcy proceedings, Canadian courts should limit the scope of their analysis to an inquiry of whether the investment in question falls within the scope of the equity claim definition provided under Canadian bankruptcy legislation. Only then can bankruptcy costs be limited and can we come closer to a model assumed by the Modiglani-Miller Theorem

The Gendered Dimensions of Social Insurance for the Non-Poor in Canada

This article emerges from an exploration of the meanings of consumer bankruptcy in the current context of Canadian society, as well as the role consumer bankruptcy plays in shaping this context. Examining consumer bankruptcy through the lens of gender relations, the claim is made that Canadian consumer bankruptcy legislation, policies, practices, and accompanying discourses are implicated in the causation and perpetuation of the conditions of marginalization and subordination endured by women who experience long-term poverty. These women are affected not only in terms of access to the bankruptcy system, but also by the broader implications of the delivery of consumer bankruptcy services and the accompanying discourses which, functioning as a form of social insurance for the middle-class, reinforce values of individualism. The increasing number of women filing for consumer bankruptcy, documented in the empirical data, is consistent with this claim, as it can be seen that middle-class women are the primary new beneficiaries of consumer bankruptcy in Canada

Bank Bankruptcy in Canada: A Comparative Perspective

During the Great Depression (1930-1933), over 9,000 banks failed in the United States, while not a single bank failed in Canada. In fact, there have been relatively few instances of bank bankruptcy proceedings in Canada from 1867 to present. Approximately eleven bank bankruptcies have been referenced in the case law to date. The first bank bankruptcy appears to be the Bank of Prince Edward Island (1882). Next came the Exchange Bank of Canada (1883), [FN3] followed by the Maritime Bank (1887), the Central Bank of Canada (1887), La Banque Ville Marie (1899), the Farmers Bank of Canada (1910), the Monarch Bank of Canada (1910), Ontario Bank (1910), [FN9] the Sovereign Bank of Canada (1911), the Bank of Vancouver (1916) and the Home Bank of Canada (1923). It would be another four decades before the next bank bankruptcy took place in 1967, when the Bank of Western Canada was wound up. The few Canadian banks that suffered financial difficulties through the Great Depression, World War II and its aftermath were absorbed into larger banks without creating significant difficulties for their creditors or depositors. Two decades later, Northland Bank (1985) was wound up, followed by the Canadian Commercial Bank (1985). The liquidation of both banks took over a decade to complete. Following the bankruptcies of these Western Canadian banks, Justice William Z. Estey led a commission examining the collapse of the Canadian Commercial Bank and Northland Bank (the “Estey Report”). In this 1986 report, the Commission described a set of circumstances involving severe corporate governance failures and a set of improvident lending procedures not unlike the current situation in the United States. Following the Estey Report, a number of changes were made to the regulatory framework for supervising banks in Canada. The most recent Canadian bank bankruptcy was the Bank of Credit and Commerce International in 1991. This article provides an overview of the legal regime for bank bankruptcy in Canada. The Global Bank Insolvency Initiative: Legal, Institutional, and Regulatory Framework to Deal with Insolvent Banks (“GBI”) is used as the framework for locating the Canadian system within an international context. Surprisingly little has been written about bank bankruptcies in North America, with much of the academic focus on developing countries. An obvious explanation for this is that in North America governments do not let banks (or at least major banks) fail. Even if this explanation is accurate, government solutions will often be in the shadow of the formal options for bank failure. Accordingly, an understanding of these options is crucial to comprehending and predicting government action in this regard. An analogy may be drawn to the government bail out of the automobile industry which was set into motion in 2008 and was described as “orderly bankruptcy.

A Team Production Theory of Canadian Corporate Law

This article suggests that the response to the most recent Supreme Court of Canada decision concerning corporate governance, Peoples, and the Canadian corporate governance debate, as currently engaged, are operating on the false underlying assumption that the principle-agent, shareholder primacy model accurately describes Canadian corporate law\u27s treatment of public corporations. The article applies the Team Production theory developed by American corporate law scholars, Margaret Blair and Lynn Stout, to argue that the Canadian corporate legal understanding of public corporations that are not controlled by a single shareholder or group of shareholders reflects a director primacy norm rather than a shareholder primacy norm. Canadian corporate law provides that directors of such public corporations with widely-held share ownership and voting rights are free from direct control of any corporate stakeholders. Rent allocation among Canadian corporate stakeholders depends on extra-legal advantages. A potential departing point for Canadian corporate law, the oppression remedy, continues to develop to deal with such extra-legal advantages rooted primarily in unequal power relations among corporate stakeholders. However, in its current application and predicted future application, the oppression remedy does not provide any given stakeholder group with an ability to dominate the boards of public corporations and obviate the director primacy norm. The article suggests that because the director primacy norm accurately describes Canadian corporate law, further consideration needs to be given to corporate law\u27s relative relevance in dictating how Canadian corporations currently operate. For example, do directors of Canadian corporations really think of themselves as mediating hierarchs and corporations as teams? More importantly, can directors of Canadian corporations play a mediating hierarch role given the current composition of corporate boards? The responses to these questions will help inform further inquiry into whether the director primacy norm is the ideal norm for Canadian corporate law

Re-defining the Role of the Canadian Judiciary in Bankruptcies and Receiverships

Consistent with prevailing neo-liberal ideologies, the Canadian bankruptcy system has become increasingly privatized. Parties have been left to bargain in the shadow of the law to determine which businesses will be rehabilitated, and how best to deal with those businesses\u27 financial difficulties. The Canadian judiciary facilitates the process, but it is largely the debtor corporation and its major creditors that drive it. Situated in this context, this commentary considers the broader issue of how contracts entered into by a debtor corporation prior to bankruptcy will be treated on the bankruptcy of the debtor corporation. It focuses in particular on successor employer liability issues. The treatment of employees in bankruptcy brings into focus the potential inequities that can surface when the rights of third parties can be negotiated away without their consent, in what is, in practice at least, an increasingly privatized bankruptcy process

Regulating Payday Lenders in Canada: Drawing on American Lessons

The regulation of payday loans holds the potential of extending the benefits of regulating overindebtedness, currently provided via bankruptcy legislation to the middle-class, to lower income debtors. This potential needs to be balanced against lower income debtors\u27 need for credit and the corresponding benefits resulting from access to credit provided by alternative credit markets, such as the payday lending market. Unlike the United States, where payday lenders have more locations than Starbucks and McDonalds combined, and payday lending regulation is up there with Vampire Weekend and the Tipping Point as an attention grabbing pop-culture reference, payday lending is relatively new, underdeveloped and unregulated in Canada. Over the last year, in the wake of a recent amendment to the Canadian Criminal Code, that would see payday lenders exempted from the 60 per cent criminal rate of interest in provinces where payday lenders are provincially regulated, Canadian provinces have began to regulate and put forth regulatory proposals for a previously unregulated area. This exercise has been attempted in the context of limited recent domestic analysis of the payday lending industry, borrowers and regulatory options. Accordingly, this article sets out to fill this void. The article draws on the American experience with payday lending and payday lending regulation, and also a first-hand experience of attempting to obtain a payday loan in Toronto, Ontario, to evaluate the current provincial reform efforts